The US embassy in Afghanistan has brought in an alcohol ban and appointed American staff to monitor private security guards after allegations that they held "deviant and lewd" parties that have been compared to Lord of the Flies.

The move comes after the US secretary of state, Hillary Clinton, ordered an investigation into allegations that employees of the private contractor ArmorGroup North America, hired to protect the embassy, were engaged in lewd behaviour and sexual misconduct at their living quarters.

The state department inspector general is leading an investigation of the contractor. The US ambassador in Afghanistan, Karl Eikenberry, met embassy staff today to discuss the situation, an embassy spokeswoman said. "We've already started to make changes to remedy some of the problems," she added.

Alcohol has been prohibited at Camp Sullivan, where ArmorGroup guards live, and diplomatic security staff have been assigned to the off-site camp, the embassy said.

The embassy "will continue to take every possible step to ensure the safety and security of American embassy personnel, while respecting the values of all Afghans, Americans and contract employees and visitors from other countries", it said.

The inquiry came after an independent group sent Clinton a 10-page dossier yesterday claiming that the security guards at the embassy had been engaged in drunken parties involving prostitutes and ritual humiliation associated with gang initiation. Pictures and video footage were attached to the dossier.

The dossier, compiled by the independent investigative group Project on Government Oversight, includes an email allegedly from a guard serving in Kabul describing scenes in which guards and supervisors are "peeing on people, eating potato chips out of [buttock] cracks, vodka shots out of [buttock] cracks (there is video of that one), broken doors after drnken [sic] brawls, threats and intimidation from those leaders participating in this activity".

The allegations are an embarrassment for the Obama administration, which is struggling to win hearts and minds in Afghanistan and the Muslim world in general. Controversy is continuing over the widespread use by the US of private contractors in war zones, of which the most notorious was Blackwater, now named Xe.

ArmorGroup, part of the Florida-based Wackenhut group, is one of the biggest private security organisations in the US. The organisation made no immediate response to the allegations.

The Project on Government Oversight, which was established in 1981 to track military procurement and bring to light any evidence of corruption, described the environment at Camp Sullivan as comparable to the anarchy in William Golding's Lord of the Flies.

It said about 300 of the 450 ArmorGroup guards were Gurkhas and the rest were Australians, South Africans and Americans.

It claimed that guards were "engaging in near-weekly deviant hazing and humiliation of subordinates" and some guards had barricaded themselves in their rooms out of fear that they could be physically harmed.

Supervisors "made no secret that, to celebrate a birthday, they brought prostitutes into Camp Sullivan, which maintains a sign-in log", it said.

According to the report, Muslim Afghan nationals were humiliated by the behaviour and apparently free-flowing alcohol.

The Project on Government Oversight stressed that comparisons should not be made with the pictures of abuse at an Iraqi prison, Abu Ghraib, because no allegations of torture were being made. The report said that the general breakdown in discipline posed a threat to the security of the embassy.

Ian Kelly, the state department spokesman, said of the reports of wild, anarchic partying: "These are very serious allegations, and we are treating them that way." Clinton had "zero tolerance" for the behaviour described and had directed a "review of the whole system" for farming out security to private contractors, which may have threatened the safety of embassy personnel, Kelly said.

The embassy said today: "Nothing is more important to us than the safety and security of all embassy personnel - Americans and Afghan - and respect for the cultural and religious values of all Afghans."

It added: "We have taken immediate steps to review all local guard force policies and procedures and have taken all possible measures to ensure our security is sound."

Senator Claire McCaskill, a Democrat who heads a subcommittee on contractor oversight, wrote to the state department calling for the inquiry in the light of the report. McCaskill's committee earlier this year conducted its own hearings on the involvement of ArmorGroup in Afghanistan.